Delhi's bus privatization experiment

Excerpts from a writeup about the Blueline buses on "Our Delhi Struggle"

The Blueline’s grim numbers stem entirely from two perverse economic incentives: the driver’s salary is wholly dependant on how many fares he picks up, and each bus is in direct competition with every other bus on the route.

The Blueline buses are privately-owned, not city-run. While a city-run service would prioritize getting its citizens from A to B, a private driver is less focused on customer service than on overtaking the next bus down the road. After all, the faster he drives, the more competitors he passes, the more passengers he picks up, and the more money he makes.

The safer he drives, the more buses will pass him, and the less money he earns.

Blueline buses are not typically driven by their owners. Instead, thousands of drivers rent their buses from a smaller group of owners at a cost of

three or four thousand rupees a day plus maintenance

. With passengers paying between two and ten rupees a ride, drivers are forced to pick up a few hundred people before they can even begin to consider buying lunch.

Like AI asking kingfisher & jet to run their planes? We have gone from worrying about on road behaviour to changing the framework itself

As I have already mentioned several times before, comparisons between public transport & airlines or other such sectors is meaningless -- airlines charge users & pay for their own costs whilst also generating profits, whereas city public transport has a constraint with it's different objective, which is to provide safe /easy transport options at lower than actual acquisition /operating /maintenance costs -- any form of public transport such as Commuter rail, Metro /Monorail is also within this league & true costs cannot be charged as they will be too high on daily users.

PT is thus a social necessity & not purely a business, like airlines or telephony. In this respect, it is similar to PDS /subsidised health, etc & needs financial support through revenue generation from other means such as real estate, advertising, etc to subsidize PT services.

For bus transport, there is the added operational difficulty of sharing roads with private transport & competitiors, if any, when it is operated purely as a business. This is why it cannot be left entirely to private players to be operated as businesses since margins will be too meagre to maintain quality /safety. Some form of an association between govt & franchisees, PPP or by leasing is probably the only optimal way to improve efficiencies whilst maintaining quality & safety.

Unless the operational framework in Delhi (ie. allowing multiple private players to operate in direct competition on the same roads /routes) is changed, these unsafe /substandard conditions will continue, as outlined in the report/s above.

For Bangalore, as I see it, the challenge is essentially confined to improving BMTC's efficiencies in existing services with the help of private players since managing the largest bus fleet in the country in tune with users' needs, being a formidable task, has clearly overwhelmed their institutional abilities. Fortunately, they are self sufficient & recover all operational costs, in fact, generate some surpluses through a combination of revenue streams, unlike London, Delhi (DTC), or even Mumbai (BEST) which are bleeding their govts heavily.

So how does revenue sharing for cross zonal routing work? Will a route based scheme be simpler to administer?

Route based scheme may not work since multiple routes overlap with one another, particularly along the Big-12 roads that lead to different end destinations.

If the city is zoned roughly as shown in the diagram below, allowing only one operator in one zone, it will have few or no overlaps with other operators, thus allowing the operator to focus on a single zone closely & operate buses to get maximum commuters, whilst allowing the operator's buses to cross over the city centre/s from one end to the other (to minimize public inconveniences by reducing the number of transfers).

It will also help /allow the operator to organize feeder /distributor routes to maximize passengers within the zone. The operator will also automatically 'police' the zone & weed out substandard operators by operating services there instead. The operators must be paid incentives to recommend necessary route modifications /additions /deletions, etc. with focus on maximizing commuters & therby revenues whilst maintaining schedules /safety, etc.

Operators must also take on the responsibility to service the non-profitable routes that fall within their zones. BMTC's experience in operating such & all other routes will help in overseeing these functions.

Same things we give BMTC for free (subsidy) can always be given to other operators as well. It is a well known fact that local public transport usually works with Real Estate and simlar subsidies

This is exactly what is being tried with zoning, but subsidies are controlled entirely by BMTC & will have to be released with restraint & caution: by paying operators on km basis & number of passengers + incentives for maintaining schedules, etc. If subsidies are doled out to pvt parties without such regulating criteria, what motives will drive them to operate at all ?

There is not enough data, from our country, that such services can't be run profitably. There isn't enough data to show other way also. So essentialy, the jury is still out on this, the profitability assumptions are neither entirely right nor fallacious :)

There are the well known cases of Kochi, M'lore & Delhi where we have seen how safety /quality suffers when buses are in direct competition with one another with the levels of fares maintained nearly same as subsidised fares with govt run services. It is obvious that they cannot maintain safety /quality at these fares. In Mangalore, I know of atleast three bus owners who have now changed over to operating multi-axle tankers for transporting petrol & inter-city buses to bangalore & exited out from city bus operations due to very low margins.

Further, as we all know, most public bus services in the country are deep in the red (incldg Mumbai, Pune, Ahmadabad, Delhi-DTC) - check their budget data from web pages.

There is ample international corroborative evidence too: The ILO paper I had posted concurs that all PTs operate with subsidies & the European union has acknowledged the need for subsidies too. The phenomenon of racing has also been experienced with privatization in most places.

If you need further "data", you may research yourself, but I have done enough on my part & convinced myself.

The need is to evolve a road where one can try and test some theories

Enough testing has already been done in Delhi & about 600 people have sacrificed their lives there in the "testing" process.

If, with all this evidence, claims continue to be made that the business can be done profitably with subsidized fares, then I have nothing more to say & will exit out from this discussion (which I think is going nowhere, senselessly anyway).

SB -- about Bogota.....

"In practice, the bus companies are not responsible for the actual provision of bus services; they are merely intermediaries between the bus owners and the government. The bus drivers are critical actors in the provision of public transportation services. The competition between them has led to dangerous driving, disregard of schedules and mistreatment of passengers."

"The weakness of the state translates into policies that overwhelmingly and disproportionately favor the most powerful actors — the bus companies — at the expense of weaker ones, such as bus owners and bus riders. The bus companies extract ample rents from doing little to provide adequate public transportation and exploit bus owners by having them pay for the right to use a route and by forcing them to compete with one another. At the same time, bus owners support bus companies’ efforts to increase the fare above its true costs because it is one way to survive despite decreasing ridership."

"At the bottom lies the rider, the least powerful actor. In theory, a capable and strong government could protect the rider by diminishing these power imbalances. In strengthening the city government’s capacity and power, therefore, lies the beginning of the solution to the problems present in the public transportation system."

Source.

1) Initially, the status of bus transport in almost all developing country cities (like Bogota, Manila, Bangkok, Jakarta, etc) was one of total chaos with too many private unregulated providers (what is similar to Mangalore /Kochi & what has become of Delhi now). All these cities are still struggling to get out of the mess & provide regulated /efficient services, but serious attempts are very difficult owing to the bus unions, who can't be broken. Delhi will also continue to struggle now, unfortunately.

2) I think the assumption that the poor record of regulation in Delhi as the factor responsible for the blueline fiasco is incorrect, though it may have led to the case becoming more extreme than it might have been in other cities. From the above case study, it's amply clear that bus firms or bus owners handing over their buses to drivers for a fee is common even in Bogota.

3) Racing & driving recklessly to gain advantage in competition is also a worldwide phenomenon that cannot be ignored in any discussion on improving bus services in the larger Indian cities, since methods of attempting privatization without careful analysis can be catastrophic - there are too many bus dependent people, too many pedestrians, very high traffic volumes, besides other negatives with unregulated providers as stated above - even Bogota is not rid of them despite Transmilano. Thus, it cannot be set aside purely as a regulatory failure, but must be seen as an industry hazard that needs attention.

4) In India, in place of unregulated private providers (& the chaos & sub-standard conditions that come with it), we have public monopolies that lose tax payers' money, are generally inefficient & with few incentives to be responsive to passengers' needs, though BMTC has been performing somewhat better.

5) I don't think you will find any published financials (for private city bus businesses) since owners typically have few buses & do not maintain accounts (even if they did, it might not be available on the net). The question of whether or not bus business is profitable depends on what quality the bus provides. For the same quality levels that BMTC provides & at the same fares, the private operator might find it very hard to manage since he is unlikely to have expensive bus maintenance infrastructure & depots. Hence, typically private buses (on Hosur rd or Marathalli) are extremely shabby & very poorly maintained since they are forced to offer even lesser fares than BMTC to attract some patronage & cater to very low-paying commuters.

6) What I have been attempting is to utilize the existing strengths that BMTC has (ie. an institutional structure & experience) & combine it with possible private sector efficiencies to improve bus services.

7) As you rightly mentioned, instead of focussing on coming up with an optimal model to improve bus services in the city, the discussion almost always shifts to center around an extreme position - demands for small-time bus players to be allowed in parallel with no regulation, whilst criticizing BMTC no end & the assertion of viability of private run buses, though this is irrelevant in the context. In my opinion, opting for deregulation or allowing private parties of whatever form without careful analysis is something worse than what we have now.

8) The only way this can move ahead sensibly is for "fence-sitters" to participate more. I request you, IDS & others interested to use the "Urban bus toolkit" from the link above, read the various case studies, play with the tool & revert with your opinions rather than be drawn into questions of viability & dwell upon the rejection of an earlier application for operating buses.

The real issue clearly is far bigger than this -- finding solutions to distribute subsidies without any misuse by private parties & help commuters with more efficiencies in bus operations.

There are over 6500 DTC buses out of which a minimum of 6000 ply each day. While DTC buses have been involved in 37 fatal accidents this year, Bluelines, only about 1600 plying on various routes, have killed 66 people so far. Last year, these buses were involved in 97 fatal accidents.
"The number of accidents caused by DTC buses is much lesser than that caused by Bluelines. No wonder, this decision will help us in bringing down the number of fatalities on Delhi roads,’’ said joint commissioner (traffic) Satyendra Garg.
Traffic police officers also point out two major problems that will be solved with the phasing out of the Bluelines. “One, these Bluelines have no designated parking space. As such, they often park illegally on roads and take up open road space. This is especially true for areas in northeast Delhi like Nandnagri and southeast Delhi’s Badarpur. Two, these Bluelines, allow footboard travel which often leads to major accidents. With DTC using its low-floor fleet judiciously, such accidents should also come down,’’ said an officer.

Click here for full report in TOI